Outsourcing
American Banker, 12/18/02: B of A: Core Is Not Being Outsourced
BY CHRIS COSTANZO
Bank of America Corp. says that its outsourcing contract with Electronic Data Systems Corp. will ultimately have the vendor handling commodity-type operations -- not systems that B of A considers core or proprietary.
Bank of America's attitude about what is a commodity contrasts sharply with that of American Express Co., which signed a $4 billion outsourcing deal in February with the global services division of International Business Machines Corp. American Express opted to outsource many components of its technology and operations, such as mainframe and midrange computing. But that deal does not include telecommunications, which is at the heart of B of A's deal with EDS.
Under its $4.5 billion agreement with EDS, which covers voice and data networks, the vendor will take over management of the 90 vendors that currently provide Bank of America with its carrier services and telephone equipment. EDS will also design and implement some new telecommunications systems and give B of A help-desk support. Ralph L. Ziegler, the managing director of network services at Charlotte-based Bank of America, made a distinction between applications developed in-house and the functions being transferred to EDS, which for the most part are bought directly from external providers. By transferring the purchasing and management of those functions to EDS, "we're giving it to someone who can do it better and who has purchasing power," Mr. Ziegler said.
Significantly, Bank of America retains its rights to a high-speed fiber optic network it is building with Sprint Corp. among 12 major cities. The 10-year deal with Sprint, announced in October, is aimed at supporting bandwidth-heavy applications, such as delivering check images to automated teller machine screens and improving customer relationship management.
The Sprint network supports Bank of America's ability to share, protect, and quickly move customer information, Mr. Ziegler said. EDS will work on the "outer edge" of the Sprint network, managing access to it. The Sprint network "is our competitive advantage," Mr. Ziegler said. "There's no value in EDS managing that contract. We'd be giving away a lot."
For American Express, managing its network entirely in-house was important, particularly because it is working on deploying new network functionality, said Steve Karl the senior vice president of technology operations.
Amex has a small network-services deal with AT&T Corp., Mr. Karl said, but all network engineering and development is done in-house. Amex did not include telecommunications in its contract with IBM because it did not view it as a core skill set of IBM's, and it did not want to end up farming out network management to subcontractors, he said.
The network "is part of the fabric and pulse of our company," Mr. Karl said. "We have a need for real-time processing and to maintain connections to millions of customers around the world."
Both Amex and Bank of America did rigorous analyses. The banking company spent nearly a year evaluating competitive bids, with the goal of bringing down its total cost of ownership on voice and data. Amex, meanwhile, involved 400 of its employees in an exhaustive 14-month effort to determine the best outsourcing supplier.
But it seems their final decisions were also influenced by entrenched ideas on the plausibility of outsourcing the network. Amex appears to have rejected the notion outright, while for Bank of America the issue was one of degree.
Observers say that telecommunications is a natural candidate for outsourcing because it is an intricate, usually generic function.
"It's a very difficult competency to acquire by hiring people one at a time," said M. Arthur Gillis, the president of Computer Based Solutions Inc., a consulting firm in Dallas. "It's much easier to hire a company." The inherent complexity of telecommunications has not changed over 30 years, he added, making it "a wise piece of the pie to outsource to specialists."
Bank of America said that it picked Plano, Tex.-based EDS over other bidders because of the vendor's purchasing power, its promise that all the roughly 1,000 B of A employees affected would be given jobs, and its commitments to customer-satisfaction improvement, Mr. Ziegler said.
Though outsourcing telecom may make sense, financial institutions have not rushed into such agreements. Among the most recent was a modest five-year, $750 million deal that the Citibank division of Citigroup Inc. signed with AT&T in 1998. That same year Bank One Corp. signed a six-year, $1.4 billion contract with AT&T, but for the past year or so the Chicago banking company has been dismantling the Technology One Alliance, which included a seven-year, $420 million contract with IBM Global Services.
Despite the apparent lack of enthusiasm, Mr. Gillis said, "If there's any truth to logic, we should expect to see more of these deals to come."
Diogo Teixeira, the chief executive officer of Livermore Research of Wellesley, Mass., said hard numbers and theoretical reasoning often get equal weight in outsourcing decisions. "You can be sure they massaged the numbers, but at the end of the day it comes down to an intangible that is hard to measure, so it gets down to a philosophical kind of thing."
A see-saw effect is also at work, Mr. Teixeira said. Outsourcing may be driven by a cost-cutting at one time and by retention of control at another, he said. "You can't ever have everything, so you go one way or the other."
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Mobile
News.Com, 12/17/02: Intel pumps up Wi-Fi investments
By Richard Shim
Intel will increase its investment in wireless networking technology Wednesday when it is expected to announce a minority stake in two companies developing Wi-Fi products.
The chipmaker's Communications Fund is throwing in with network access company STSN and IP telephony software developer TeleSym. Intel first invested STSN in 1999. The companies would not disclose the terms or the amounts of the financing.
[more]
Microsoft
Microsoft Press Release, 12/17/02: IDC Puts Windows Ahead of Linux in TCO Study
REDMOND, Wash., Dec. 17, 2002 -- Businesses are demanding more reliable methods of quantifying the cost and overall value of adopting Linux products compared to Microsoft offerings. In response, Microsoft commissioned IDC, a recognized leader in cost analysis methodologies, to conduct a comprehensive study that evaluated the total cost of ownership (TCO) for Microsoft Windows 2000 and Linux server offerings.
The study evaluated Microsoft and Linux in the context of five specific workloads common to IT infrastructures today. IDC's findings suggest that Windows 2000 offers a lower total cost of ownership than a Linux-based server across four of these five workloads.
[more]
TechWeb, 12/17/02: The Year Ahead For Microsoft: Upgrades To Windows, Office, And Enterprise Servers
By Mitch Wagner
The year ahead for Microsoft contains major upgrades to Windows, Office, and enterprise servers, and the looming threat of continued antitrust litigation.
Microsoft on Tuesday issued a statement outlining its plans for 2003, saying the year will see the "most bountiful crop yet" of software for its .Net Web services strategy, connecting enterprise applications using XML standards. Next year will see the release of Windows .Net Server 2003, Office 11, the Visual Studio .Net development toolkit, and application servers.
[more]
Security
TechWeb, 12/17/02: New Virus Attacks Windows 2000, XP Machines
This one is being called Iraq_Oil and is considered fairly threatening.
By George V. Hulme
Antivirus vendor F-Secure Corp. is warning that a new virus is on the prowl. The company has listed the virus, dubbed Lioten or Iraq_Oil, as a Level 2 threat. On a scale of one to five, Level 1 is the most dangerous. The virus was discovered "in the wild" Monday.
[more]
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